Independent Canadian news and analysis for the nonprofit sector

One more time: it costs money to raise money

Are you just a little tired of having to justify your charity, and charities in general, in the face of common but uninformed perceptions about fundraising costs? Here are some facts from fundraising expert and author George Stanois that will help you stand your ground. They’re taken from an interview he gave to the CBC in response to its investigative report on external telemarketing firms that was widely criticized as biased and incomplete.

There are over 85,000 registered charitable organizations in Canada.

The Canada Revenue Agency states that charities cannot have fundraising costs over 35% of their revenues. In other words, it recognizes that fundraising isn’t free.

If between 2004 and 2008, $762 million was spent on external fundraisers, particularly for telemarketing services as the CBC claimed, that represents only 2% of $35 billion in revenue that Canadian charities generated during that period;

Only 200 out of 85,000 organizations, or 0.2% of charitable organizations had fundraising costs that exceeded 50% of their revenues – and these organizations warrant an automatic review by the Canada Revenue Agency, which has the power to address the abuses and revoke the organization’s charitable status;

“Most charitable organizations generate substantial fundraising activity that cannot be supported solely by volunteers, and must include paid professionals to accomplish their mission,” George points out. “If our organizations warrant sound management, then the professionals who work for them warrant competitive salaries – based on their competencies and experience – like in any other sector.”

Charitable organizations must develop their philanthropic market using a mix of available methods, he continues. Some fundraising strategies such as direct mail, telemarketing, and special events, can be fairly expensive. The key is to also implement lower-cost initiatives such as in-person solicitation, annual campaigns, major gifts and planned giving.

Diversifying its fundraising methods allows a charity to acquire new donors, retain existing supporters, develop new fundraising programs and raise awareness of the organization, all within the 35% CRA guideline. But charities that rely solely on the most costly methods of fundraising may be at risk of surpassing that norm. Like a healthy investment portfolio, the key is diversification.